The gig and creator economy exploded during the pandemic, which compelled the EU council to adopt a new directive to foster tax transparency - DAC7.
This directive, however, will impact platforms in the gig and creator economy, as well as creators or freelancers that use the platforms for transactions.
By the time you're done with this article, you will know if and how your business is affected by DAC7.
That means digital platforms within the EU or platform users in the EU will have to give tax authorities information for accurate taxation. Not only will it halt tax evasion, but it is expected to boost the economy after the downturn caused by the pandemic.
What DAC7 Means For Digital Platforms
If you run a digital platform in the gig and creator economy that facilitates personal services, you must comply with the DAC7 directive or risk sanctions. That entails learning and understanding the directives and their responsibilities.
For example, you need to know what needs to be collected, when, and how it should be collected for the smooth operation of your platform.
Undoubtedly, DAC7 will incur additional administrative processes for marketplace platforms - which is a significant downside. That is because platforms would have to verify data, request additional documents, update previously received data, and report to the appropriate authorities.
What DAC7 Means For Freelancers/Creators
For platforms to adhere to the new directive, platform users must share relevant information with the platform. That way, tax authorities will have better insight into their earnings and accurately tax them.
The new directive also provides measures against users who might refuse to share relevant information with your platform. In that case, the platform can terminate their account after two reminders.
Note that the core purpose of DAC7 is to foster tax transparency by ensuring that taxable and hard-to-track events are taxed, thereby discouraging tax evaders and double taxation. That is good news for the public purse and honest entrepreneurs.
A New Tool For An Ever Growing Economy
The gig and creator economy is growing at an astonishing rate, providing an avenue for the EU to revive the economy after the downturn caused by the pandemic. Furthermore, with the DAC7 directive, tax fraud will be prevented, as well as evasion and avoidance.
To adapt, platforms will need a powerful and flexible VAT compliance technology to handle the additional administrative demands. On the flip side, you don’t to stress yourself or reinvent the wheel when a solution exists.
By 1st January 2023, the new rule will become activated. So the earlier you start getting ready, the easier it will be to adapt and operate. You can begin by taking our test to see if your business will be affected by DAC7. If you want more information or resources regarding DAC7, please do check out our blog.
Insights from our experts
Keep yourself updated with the latest news, insights and strategies about the finance side of the Creator Economy
From disclosing brand relationships to country-specific regulations, learn how to stay compliant and avoid potential penalties and fines.Read more
Streamline your influencer payments with Gigapay. Discover how this platform simplifies payouts in influencer marketing.Read more